54
Speaker’s curriculum vitae
Education: Master in Applied Mathematics – Moscow State University “Lomonosov”Master in Finances and Credit – Financial Academy
Previous positions:
1994 Auditing company Finexport, Expert and Leading Expert
1995 Commercial Bank Balchug, Deputy Chief Accountant
1996 Absolut Bank, Deputy Chief Accountant
1997 Absolut Bank, Deputy Chairman of the Management Board & Head of the Internal Audit Service
2001 Absolut Bank, Senior Deputy Chairman of the Management Board
Present position:
2004 Absolut Bank, Chairman of the Management Board
55
The Russian banking market is benefiting from strong growth and, with its focused strategy and ambitious branch expansion program, KBC is outgrowing many competitors in various fields
Moreover, risks are closely monitored and KBC risk standards are being implemented
If the business plan is executed properly, the market will contribute close to 100 million euros to group earnings by the beginning of the next decade
56
A strong economic environment,…
The Russian economy is the 11th largest in the world and is expected to significantly outgrow other large economies
On 14/03/08, Standard & Poor‘s changed its forecast for Russia’s rating from stable to positive
BBB+
11th place
Source: International Monetary Fund
57
…political stability and rising purchasing power…
Average salary per month, in EUR
Continuity of authority
Share of the stabilisation fund in GDP, in %
V.V. Putin D.A. Medvedev
58
…provide a solid environment for an emerging retail banking industry
0%10%20%30%40%50%60%70%80%90%
100%
2001 2002 2003 2004 2005 2006
Growing middle class in Russia
Corporate loans / GDP in Russia
$250-350
$350-500
$500-1000
Mortgage loans
Assets of banking sector
Monthly income
59
Doubling of size every year and continuous outperformance vs. many peers
59
Growth compared with Russian Peers
8377
6856
42
25 23
0
20
40
60
80
100
2001 2002 2003 2004 2005 2006 2007
Ranking by Asset Size
01/01/2007- 31/12/2007 growth rate (in %)Volume as at 01/01/2008 (in bn RUB)
Source: RBC rating
33% 36% 33% 41% 48%34%
58% 64%
139%121%
47%
98%
0
25
50
75
100
125
150
2002 2003 2004 2005 2006 2007
Top 100 Russian Banks YoY Asset GrowthAbsolut Bank (KBC) YoY Asset Growth
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Adequate business profile and right strategy to maintain strong past performance
STRATEGY
Focus primarily on:Retail customers from low-middle class and aboveSMEs, mid-sized companies
Focus on a selected number of regions that have the highest value-creation potential
Provide a wide but not full product range that satisfy customer needs. Aim to build long-term relationships (“relationship-driven approach”)
Build competitive advantage through service excellence
OBJECTIVESBecome one of Russia’s top-15 banks by total assets
Expand initially into 25 regions
Achieve regional market share of 7.5% for target products: mortgages, car loans (5 years)
Create an efficient and effective distribution network, focusing primarily on large industrial cities with a population of over 500 000 persons
Absolut Bank is positioning itself as a Russian bank with foreign shareholders
Focused strategy requiring quick and effective execution60
61
Targeted retail product development plan
A > $3000
B $1500-3000
C1 $700-1500
C2 $500-700
D $300-500
E < $300
Mor
tgag
es
Car
loan
s
Cre
ditc
ards
Dep
osits
SME
Priv
ate
Ban
king
Con
sum
erFi
nanc
eA
sset
sM
anag
emen
t
Existing products
Retail clients are divided into 6 segments per value of individual monthly income:
A > $3000 / B $1500-3000 / C1 $700-1500 / C2 $500-700 / D $300-500 / E < $300
Under investigation
Insu
ranc
e
As the standard of living rises, the middle class is becoming the fastest growing segmentWe are targeting the middle-class segment with traditional family values, while……aiming to build long-term relationships with clients throughout their life cycle and……to become a “family bank” in terms of range and quality of products/services
62
Strong expansion of branch network and regional coverage
3
14
38
7177
1 2
11
23 25
0
4 0
8 0
1 2 0
2004 2005 2006 2007 2008
0
2 0 0 0
4 0 0 0
6 0 0 0
• Barnaul• Chelyabinsk• Ekaterinburg• Kazan• Kemerovo• Krasnodar• Krasnoyarsk• Lipetsk• Moscow• Moscow Region• Nizhniy Novgorod• Novokuznetsk• Novosibirsk• Omsk• Orenburg• Perm• Rostov-on-Don• Saint-Petersburg• Samara• Stavropol• Tyumen• Ufa• Volgograd• Voronezh
Regional presence:
Creation of a federal network
Presence in the 25 most developed regions by 2Q 2008
RegionsOffices
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Integration within KBC group well-advanced
April 2007: Signing of the acquisition
July 2007: Closing of the acquisition
April 2008: Completion of Integration Program
StrategyFinance and reportingRisk managementAudit and internal controlCompliance
Ongoing projects :
Network reorganisation
Development of the Credit department
Strengthening of the Organisation department
Review of credit delegation authorities
Fine-tuning of strategy
Alignment of IT & operations with business objectives
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Integrated risk governance
Group Credit Risk Committee
Group Operational Risk Committee Group ALCO
Group Trading Risk Committee
Board of Directors of Absolut Bank
Management Board of Absolut Bank
Credit Risk Committee
Operational Risk Committee
ALCOTransaction Credit Committee
Transaction Credit Committee
KBC Head Office
Integrated risk reporting, incl. for Basel II capital requirements
Action Plan to complete full alignment of risk management approach
66
Financial ambitions
In m euros 2005 2006 2007 2007% Budget assumptions for the 2008 – 2010 period
Customer loans 509 1 224 2 594 112% Volume growth CAGR to be higher than 50%- retail loans 72 248 804 223%- business loans 436 975 1 790 84%
Customer deposits 193 554 820 48% Volume growth CAGR to be higher than 50%- retail deposits 68 194 417 116%- business deposits 125 360 403 12%
Total income (top line) 43 78 121 57% Income growth CAGR to be higher than 50%
Cost/Income ratio (C/I) 41% 49% 63% C/I ratio to decrease post-2008 to 55% by 2010
Loan loss ratio (LLR) 2.40% 1.70% 0.70% LLR ratio to increase due to strong loan growth (1.50 to 2.00% range)
Net profit (before minorities) 12 19 24 28% Profit growth to accelerate in 2009 to reach a level close to 100m in 2010
All figures with stable 2007 RUB/EUR conversion rates
A minority share in profit of 5% applies
Tax rate assumption: 24%
67
The Russian banking market is benefiting from strong growth and, with its focused strategy and ambitious branch expansion program, KBC is outgrowing many competitors in various fields
Moreover, risks are closely monitored and KBC risk standards are being implemented
If the business plan is executed properly, the market will contribute close to 100 million euros to group earnings by the beginning of the next decade